Does your financial intelligence team communicate with your onboarding team? If the two sit in separate offices and rarely make contact with one another, a customer that poses a money-laundering risk might very well fall through the cracks.
Financial institutions—like other complicated organizations—tend to have grown up around silos. “Silos” are departments that run according to their own rules and tend to satisfy their own agendas, rather than the agenda of the organization more holistically. When a financial institution is overly siloed, expertise from one department may not be shared in a timely manner with other departments.
“Silos” can refer to more than just how a financial organization is set up. A siloed mentality, for instance, is one in which a team derives its status (and maybe even power) from its own silo. People within such silos advance their own goals, rather than working to further the goals of the financial institution, as a whole.
When it comes to BSA/AML compliance, silos are something that bad actors can exploit for their own gain. Former community bank BSA officer Ryan Rasske, who is now a Senior Vice President at the American Bankers Association, has been quoted as saying: “If there are silos in our institutions, they need to start being broken down…. Sharing information across those lines is invaluable, and criminals are going to be taking full advantage of institutions that are not updating their programs accordingly .”
A January 21, 2022, blog post by KPMG Partner Annabel Reoch makes a similar point: “Whether it is bribery and corruption, facilitation of tax evasion, modern slavery or questionable business conduct in general, the fight against financial crime is interconnected. There cannot be one function addressing one part of financial crime regulations without letting the others know.”
Ways to Break Down Silos
Learn how to share intelligence effectively. Identifying a potentially fraudulent transaction is one thing. It’s another thing altogether to share that information with each and every individual who might be able to take appropriate action. Financial institutions need to educate their employees on how to share red-flag behavior in a timely manner—and with whom.
Understand the legacy systems at play. Too often, important information about compliance resides in legacy systems. Leaders of financial institutions need to know that there is proper integration among their various legacy systems so warning signs don’t go undetected.
Use technology to consolidate intelligence. Compliance officers can gain an understanding of silos and then work to begin breaking them down.
That said, a compliance officer’s job is complicated. For this reason, savvy financial institutions are increasingly using automated solutions to make sure that potential problems, once detected, are made known to individuals in many different functions within an organization.
Foster a culture of compliance. Ideally, all stakeholders will be knowledgeable about how to detect and report fraudulent transactions and possible money-laundering attempts to the proper line of business at their FI. Everyone -- from the tellers and customer service representatives in the phone bank to the C-suite and the board of directors—should be involved in making sure that an institution’s compliance goals are met.
When silos have effectively been broken down, companies sometimes say they’re taking an ecosystem approach to AML/BSA compliance.
Make sure efforts to communicate effectively across silos are ongoing. There’s nothing “set it and forget it” about compliance. Efforts to break down silos and to communicate effectively across the financial institution should be an ongoing exercise.
RiskScout’s platform is designed to help institution’s break down silos and streamline interdepartmental communications and efforts of managing higher-burden individuals and businesses. Learn more at www.riskscout.com.
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